When a government raises its budget deficit, then that country's
A)national saving rises, so its supply of loanable funds shifts right.
B)national saving falls, so its supply of loanable funds shifts left.
C)national saving rises, so its demand for loanable funds shifts right.
D)national saving falls, so its demand for loanable funds shifts left.

Question

Quizplus · Accepted Answer

When a government raises its budget deficit, it typically reduces national saving because it is spending more than it is collecting in taxes. This decrease in national saving reduces the supply of loanable funds, causing the supply curve to shift to the left.

When a Government Raises Its Budget Deficit, Then That Country's